First Quarter 2024 Commentary | Caldwell North American Fund Annual Commentary

Market Commentary

For the first quarter of 2024, the Caldwell North American Fund (“CNA” or “Fund”) gained 8.8% versus a gain of 10.0% for the Fund’s benchmark, which comprises an equal blend of the S&P 500 Total Return Index and the S&P/TSX Composite Total Return Index. From a sector standpoint Energy, Information Technology, and Industrials were relative outperformers, whereas, Real Estate, Utilities, and Consumer Discretionary underperformed.

Portfolio Commentary

Top contributors to the Fund’s performance in the first quarter of 2024 were Amazon (“AMZN”), Boston Scientific (“BSX”), and Microsoft (“MSFT”). AMZN rerated higher as the company continued to show strong momentum in its Retail segment as well as in its Cloud Computing segment, Amazon Web Services (“AWS”), which is also the company’s main profit driver. Its shift to a more regional fulfilment network has enabled record delivery speeds, also helping drive greater purchase frequency by customers. Furthermore, the regionalization also led to a reduction in per-unit fulfilment costs for the first time in over five years. AWS benefitted from cloud migrations increasing again as the recent headwinds from customers pursuing cost optimizations appear to be diminishing. The company’s management anticipates continued accelerating trends within AWS due to the ongoing migration toward Cloud Computing as well as customers’ growing interest in its generative Artificial Intelligence (“AI”) offerings. The strong performance of BSX was aided by the medical equipment maker providing its full-year outlook that exceeded investors’ forecasts, as the company is benefitting from robust demand for its heart devices. MSFT continued to rerate higher partly as a result of its dominant position in the global cloud computing market. It is the only company seeing a material growth benefit from AI adoption among the three major hyper-scale cloud players.

During the first quarter of 2024, the Fund initiated positions in ATS Corp. (“ATS”) and Cognex (“CGNX”). ATS is a leading provider of automation solutions, servicing multinational customers in a broad range of markets. The company is well-positioned to benefit from strong secular tailwinds in Electric Vehicles, Life Sciences, and Nuclear. Continued supply chain improvements and operational optimization should also lead to margin improvements. CGNX is a provider of vision systems, vision software, and vision sensors used in the automation of manufacturing as well as industrial code scanning. The automation cycle is showing signs of having passed its bottom, which should translate to moderately improving broad-based growth for the company progressing through this year.

Looking Forward

Inflation, interest rates, and the risk of recession continue to be the most prevalent themes in 2024. Macroeconomic forces are still the most dominant factors driving the markets. If inflation remains at a manageable level, central banks may be able to orchestrate a soft landing for the economy, avoiding a typical recession. However, if inflation elevates to undesirable levels again, a harder landing may be necessary where interest rates strain consumer spending, investments, and corporate profits, ultimately resulting in a classic recession with increased unemployment. While economic uncertainty is a predominant risk in the markets today, we remind investors that one of the Fund’s investment principles is to protect capital by seeking reasonable valuations. To that end, we think the Fund’s value tilt positions it well for the uncertain environment. History has taught us that crisis creates new opportunities and for those investors with multi-year investment horizons, we will continue to manage portfolios based on our investment principles of protecting and growing our investors’ capital through discounted valuations, strong balance sheets, good management teams and attractive business environments.

Series F, total return CAD terms
Standard performance as at December 31, 2023:
Caldwell North American Fund Series F: 1 Year: 11.0%, 3 year: 9.5%, 5 year: 9.9%, Since Inception (August 8, 2014): 6.5%.
50% S&P/TSX Composite Total Return Index and 50% S&P500 Total Return Index: 1 Year: 17.3%, 3 year: 10.5%, 5 year: 13.2%,
Since Inception (August 8, 2014): 10.6%.
All data is as of December 31, 2023 sourced from Capital IQ, unless otherwise specified.
First purchased: MSFT 2/2/2022, AMZN 2/2/2023, STN 10/17/2022.
The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Rates of returns, unless otherwise indicated, are the historical annual compounded returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.

Publication date: January 17, 2023

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